Employees Retirement System of Texas

See online finding aid for the agency history.

From the description of Employees Retirement System records, 1942, 1947-2007, undated. (Texas State Library & Archives Commission). WorldCat record id: 387451865

The Employees Retirement System of Texas (ERS) oversees retirement and health benefits for State of Texas employees to provide for, protect, and enhance the economic well-being of members, retirees, and their beneficiaries through effectively managing benefit programs, using sound actuarial principles and available resources consistent with applicable laws. The programs offered by ERS include benefit payments for both service-related and disability-related retirements and benefits for survivors of active and retired members.

During the late 1930s, a group of state employees, some of whom eventually became the leaders of the Texas Public Employees Association, began thinking about a retirement system for state employees. Almost simultaneously, during World War II, officials of the Texas Highway Department were concerned by the loss of qualified employees to private industry and considered proposing a State Highway Department Retirement System. The two groups formed a coalition for all state employees that resulted in legislative action by the 49th Texas Legislature in 1945. Representatives George Parkhouse and Sherwood Brown sponsored House Joint Resolution 10, allowing Texans to vote in November 1946 to approve or reject the formation of a Retirement, Disability and Death Compensation Fund for state employees. The ballot measure passed, and, following two House-Senate Conference Committees, the Employees Retirement System of Texas (ERS) was created effective September 1, 1947 by House Bill 168, 50th Legislature, Regular Session, pursuant to a constitutional amendment (Article XVI, Section 67).

Legislation passed in 1955 by the 54th Legislature (Senate Bill 203, Regular Session) transferred the administration of the Judicial Retirement System of Texas to ERS. In November 1957, Texans approved a constitutional amendment that implemented a major reorganization of ERS, effective September 1, 1958, transforming the agency from a money-purchase plan (based on employer and employee contributions and interest earned divided by life expectancy), to a defined benefit plan (with retirement payments based on length of service and a final average salary). The old system would still be in effect for 10 years, effectively meaning that ERS operated two parallel retirement systems for a decade. In 1963, the membership of ERS expanded to include elected state officials, including legislators. District attorneys were included by the 60th Legislature in 1967 (Senate Bill 281, Regular Session).

The Board of Trustees' investment policies, except where specifically directed otherwise by the state constitution and statutes, are guided by the Prudent Person rule set forth in the constitution. The trustees have established investment objectives and investment operating policies to obtain the optimum return on ERS investments consistent with the assumption of prudent risk. The primary objective of ERS is to earn an absolute return on total investments that will ensure the payments due to ERS members and their beneficiaries at a reasonable cost to the taxpayers of the state.

ERS has the powers, privileges, and immunities of a corporation. Although the system is a separate legal entity and by statute must prepare a separate annual financial report, it is also considered a part of the State of Texas financial reporting entity and is included in the state's annual financial report.

ERS was limited in the beginning to investing only in government securities. During its first year, the $2.9 million in member and state contributions was invested in U.S. bonds. After the reorganization in 1958, investments were allowed, within specific parameters, in corporate securities, common stocks, preferred stocks, debentures, bonds, mortgages, etc. The first investment in corporate stocks was in 1960 when ERS purchased 10,000 shares in 30 corporations at a cost of $614 million. The change that possibly affected ERS operation more than any in its 50-year history came in 1975 (Senate Bill 90, 64th Legislature, Regular Session), when the Legislature created the Texas Employees Uniform Group Insurance Program to provide high quality health insurance and other optional coverages for employees, retirees and their eligible dependents beginning September 1, 1976. Known as UGIP, it has grown over the years and now also offers this health insurance coverage to most state institutions of higher education. In 1992 membership in UGIP was expanded to include employees of state institutions of higher education, junior colleges, and community colleges, other than the University of Texas and Texas A&M Systems (which are covered by the Teacher Retirement System of Texas).

Between 1947 and 1957, the Board of Trustees of the Employees Retirement System of Texas consisted of seven members, including four ex officio members (the State Life Insurance Commissioner, the Chairman of the Board of Control, the Chairman of the Texas Highway Commission, and the Attorney General) and three members nominated and elected by the members of the Retirement System. The composition of the Board was changed in 1957 to consist of the Attorney General or an Assistant Attorney General (ex officio), one member appointed by the Governor, one member appointed by the Chief Justice of the Supreme Court, one member appointed by the Speaker of the House of Representatives, and three members elected by the members. In 1963, the Attorney General was removed from the Board, leaving the current six members. The appointed members must be confirmed by the Senate. Terms are for six years, overlapping. Positions are non-salaried, and the chair rotates annually.

ERS began its operation with a $25,000 state appropriation and was housed in several rooms on North Congress Avenue, north of the Capitol, in an apartment building behind a drug store. ERS built and occupied its first building in 1966. At the end of fiscal year 2008, active membership in the system numbered 135,171 persons, with 73,266 retirees and beneficiaries receiving benefits.

(Sources include: Guide to Texas State Agencies, 11th edition (2001); a short summary of the Employees Retirement System of Texas on its website, at http://www.ers.state.tx.us/htdocs/about/history/default.aspx ; the agency's Fiscal Year 2007 Annual Report, at http://www.ers.state.tx.us/htdocs/news/legislative/documents/ar_2007.pdf ; and statistics found at the agency's website, at http://www.ers.state.tx.us/about/facts/default.aspx ; all websites accessed April 2009.)

From the guide to the Employees Retirement System records, 1942, 1947-2007, undated, (Texas State Archives)